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Lecture Notes

Okay, let's continue with what unions do, and as I mentioned earlier on the previous slide a lot of the evidence we have, or some of the early evidence we have here is from the book that Richard Freeman and James Medoff wrote in 1984 called, "What do Unions do?" I don't think I mentioned the title of the book on the previous slide. And so what about wage levels? What do unions do for wage levels? Well, unions raise wages, that's one of the core functions of a union is to advocate on behalf of individual employees for higher wages, to use their power, their leverage to increase wages through the bargaining process, and wages tend to be 15 percent higher on average compared to nonunion wages, and we can talk more about that. What about wage distribution? How broad or narrow the wage distribution is, how equal or unequal the wage distribution is. Unions tend to compress, to decrease unequal wage distribution across the firm. Unions increase the likelihood of benefits being offered and the generosity, or how generous the levels of those benefits are. Unions increase the likelihood that disciplinary action will be taken for something that's called just cause, something we'll talk about in this class. It's nearly universal in all union contracts and almost nonexistent in all nonunion work places, and by just cause for discipline and discharge I mean that management cannot act without having a good reason or a supported reason when they engage in disciplinary action or even discharge. And finally, unions have been shown to assist employees in exercising the rights that they have, not just the collective bargaining rights, but statutory rights that they have, and unions increase the importance that's placed on seniority in the workplace, something that is in some ways controversial. There are advantages and disadvantages associated with seniority as a factor or a criteria for employment managerial decisions and we can expand upon that as well.